Budget 2014: No let up for those at the bottom of the economic heap

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Budget 2014: No let up for those at the bottom of the economic heap

John Morris, chief executive of the Trident Social Investment Group, on the highs and lows for housing in yesterday's Budget.

There was some good news for housing in Chancellor George Osborne’s Budget yesterday. Yet there was no abatement in mounting pressure on those at the bottom of the economic heap, many of whom live in social housing, despite the Chancellor trumpeting again that ‘we’re all in this together.’

Welcome is the £525m of repayable development finance to kick start new housing construction of around 15,000 homes through small and medium size builders, which should help boost employment in this part of the construction sector.

Also welcome is consultation on a new ‘right to build’ and the provision of a £150m loan fund for custom builders to access council land. And the flirtation with garden cities seems to be over as one is now planned in Kent. Other local authorities will discover if they have the opportunity to create a garden city once the government has published its prospectus, although it is hard to see how they will fare any better than Gordon Brown’s eco-towns given the rampant nimbyism of the times. A small loan pot for estate regeneration is all the inner city receives.

Less welcome is the extension of the help to buy scheme to 2020 at an estimated cost of £6bn to the taxpayer. Surely this could have been better invested in direct provision of new, affordable homes – that is supply - without stoking-up a renewed house price bubble – demand - which will need to be tackled with higher interest rates after the May 2015 general election to the detriment of the whole economy and household budgets. Some 250,000 homes are needed every year just to meet current housing needs and this figure goes up every year that the requirement remains unmet. The Budget leaves us far from this aspiration.

On the welfare front, the Chancellor announced the dreaded cap on the total welfare budget at £119.5bn for 2015-16 to act as a restraint on future spending in this area. In general terms, this will mean most benefit recipients other than pensioners having to live on a fixed pot of money even where the cost of living is spiralling.

Austerity and welfare reforms already enacted are putting increasing pressure on the already denuded living standards of most social tenants. The majority were surviving on low incomes before the financial crisis struck in 2008. Since then, most have seen their incomes fall in real terms and now face a future living on the margins in one of the world’s wealthiest economies.

A recent report by the Equality Trust points to an increasing gulf between the richest and poorest in our society where the top 1 per cent control more wealth than at any time since 1918 and where the incomes of those on average or low incomes are stagnating. Just 100 families own as much wealth in the UK as the bottom 18m citizens. And the cost of inequality to the economy in poorer health and wellbeing, under-developed human capital and crime is estimated to be £39bn annually, or one and a half times the housing benefit bill.

As well as a growing income gap between social tenants and the national average wage, there is a yawning wealth gulf between home owners and tenants of at least £100 to £1. Few tenants have much in the way of assets upon which they can depend in times of crisis with almost half of the minority with of tenants with any savings at all having less than £1,000 to fall back on.

Chancellor Osborne’s mantra that we are ‘all in it together’ rings hollow for social tenants. For many there is a future of declining living standards, increased debt, reduced rehousing and relocation opportunities, trips to the food bank and life chances set at zero. At the same time, massive subsidies are going to home owners to subsidise mortgage deposits while social housing construction withers on the vine and the replacement rate for the ‘rejuvenated’ Right-to-Buy is stuck at one new home for every seven sold.